Expert: Five-year plan for car price cut is right

Business & Markets 2013
Written by Bernama
Wednesday, 29 May 2013 16:00
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KUALA LUMPUR (May 29): The government's plan to reduce car prices
gradually by between 20% and 30% within the next five years is the
best mechanism for consumers and the automotive industry without
disrupting the ecosystem, says an industry expert.
"Five years is the right timing to reduce car prices because a sudden
reduction will impact the second-hand car industry," Malaysia
Automotive Institute (MAI) chief executive officer Madani Sahari said.
He said though the car price cut plan has recently -received wide
publicity, the exercise itself started last year with some popular car
brands reducing their car prices by 2%-5%.
"The government has had the car price reduction plan in the yet-tobe-
announced National Automotive Policy since 2011 and had started to
implement it since last year in a silent way," he said.
Madani was speaking to reporters on the sidelines of a forum on
'Business Time Insight – The National Automotive Policy' here today.
On Tuesday, Prime Minister Datuk Seri Najib Razak reiterated the
government's commitment to gradually reduce car prices by 20%-30%
within the next five years.
Madani said the car price reduction does not involve a cut in the excise
duties, as Malaysian companies in reality are only paying about 40% of
excise duties, even though it hovers at around 65%-105% depending on the segment, due to value-added activities
undertaken in the country.
"Completely knocked down (CKD) cars which are assembled in Malaysia basically have value-added activities, and are
therefore receiving the privilege of lower excise duty.
"Based on our calculations, most of our CKD cars enjoy excise duty in the range of 40%," he said.
The rate of excise duty, he said, is in line with neighbouring countries such as Indonesia and Thailand which have imposed
excise duties of between 30% and 50%, depending on the segment.
He said the key factor in reducing car prices is by opening up the automotive industry to allow healthy competition, which
would eventually bring prices down.
Meanwhile, Volkswagen Group Malaysia managing director Dr Zeno Kerschbaumer said the car price reduction policy shows
the Malaysian government's effort to put consumers into the focus of their attention.
"This perfectly matches our (Volkswagen's) policy to continuously bring the latest TECHNOLOGY [] to customers at the best
price possible.
"I think it's a big message to consumers and give them the confidence that the government is giving the consumers interest in
the focus of their policy," he said.
He said the move is also in line with the principle that the customers have to drive the policy.
"We need to leave all our options to the customers, and the customers in the end need to decide what better fits their
requirements," he said.